ICANN's .Net Evaluator Under Scope

The Internet Corporation for Assigned Names and Numbers (ICANN) said it is confident that Telcordia Technologies, its choice to pick the next .net manager from a list of bidders, can render a fair decision.

The comment comes in the wake of a Web of connections among the company and the bidders whose applications for the domain it will be reviewing.

"Substantial safeguards have been established to ensure that the members of
the Telcordia evaluation team who review and analyze the applications do so
in an objective manner independent of inappropriate influences," the governing body said in an advisory. "Neither Telcordia Technologies, Inc. nor individual members of the evaluation team has any financial interest in or similar dealings with any of the applicants."

But Telcordia has indirect connections with two of the five bidders: the incumbent .net owner VeriSign and NeuLevel, which is owned by NeuStar.

The majority of NeuStar, the owner of .net bidder NeuLevel, is owned by Warburg Pincus, one of two companies vying for ownership of Telcordia, the independent entity chosen by ICANN to choose the next .net owner.

So can ICANN really be sure that Telcordia, a company currently in the process of being bought by Warburg Pincus, can render a fair decision in the end?

Ties That Bind?

Telcordia's parent company, Science Applications International Corp. (SAIC), had controlling interest in the registrar company Network Solutions (NSI) before VeriSign bought it in 2000 in a deal valued around $21 billion.

Dave Sincoskie, head of the team evaluating the
five .net bids, served on NSI's technical advisory board from 1998 to 1999.
What's more, William Roper, SAIC's corporate executive vice president, is
currently on VeriSign's board of directors.

SAIC sold all its VeriSign shares in 2003 and no longer holds any investment stake in the company. And Sincoskie has not had any contact with NSI since the registrar's sale to VeriSign.

VeriSign and Telcordia entered a partnership
in 2000 to create a universal Electronic Numbering (ENUM) directory for phones, faxes and pagers based on an IP address-like system. The companies ended their ENUM trial after six months.

VeriSign isn't the only bidder whose connection to Telcordia is open to scrutiny.

NeuLevel, which is a subsidiary of NeuStar and owns the .biz domain extension, formed a partnership last year with Japan Registry Services Co. to place its .net bid under the Sentan Registry Services joint venture.

NeuStar was formed five years ago by Warburg Pincus and Lockheed Martin to serve as the FCC-approved administrator of the North American Numbering Plan (NANP), which is the area code directory for telephones in the United States, Canada, Bermuda and much of the Caribbean.

However, according to FCC rules, the NANP cannot be administered by a company aligning itself within the telecommunications sector. In the lone dissent of the 1999 ruling, FCC Commissioner Harold Furchtgott-Roth reiterated this aspect of the FCC's rules.

"I am skeptical whether establishing a so-called 'separate affiliate' would ever be sufficient to alleviate the neutrality concerns raised by a transfer of this sort, where the parent company has telecommunications investments as extensive as Warburg's," he wrote. "It appears to me that Warburg will, as a practical matter, retain significant ability to influence and control NeuStar, and that it will ultimately control the voting trust that owns the majority of NeuStar shares."

Furchtgott-Roth added in his dissent that Warburg will have significant control over the NeuStar board of directors.

"Three members of the initial five-member NeuStar board of directors will be aligned with Warburg, since two Warburg representatives and the Warburg-nominated NeuStar CEO will serve on the initial board," he wrote. "Warburg will also control who serves as the two 'independent' directors on the NeuStar board, since no independent director can be selected without the approval of one of the Warburg representatives and since the Warburg-nominated NeuStar CEO will nominate the independent directors."

As a result of the Warburg stake in NeuStar, Furchtgott-Roth concluded that it was impossible for NeuStar to be a neutral entity, truly independent of Warburg's influence.

Daniel Diaz, NeuStar spokesman, said the company has no comment.

ICANN's Role

ICANN officials wouldn't comment specifically on the other candidates under consideration before finally settling on Telcordia, but said it had to
pick the company with the best expertise and balance it against possible
conflict-of-interest issues.

"A comprehensive review was undertaken of Telcordia's links to
and engagements with companies submitting applications," the advisory said on ICANN's site. "The nature of each
link was determined to be highly unlikely to influence any aspect of the
evaluation. This analysis was reviewed with ICANN's General Counsel, who
concurred with this conclusion."

However, Jonathan Weinberg, professor of law at Wayne State University, believes ICANN is leaving itself wide open for attack.

"I don't know what's behind ICANN's decision to engage Telcordia of all
possible companies to do this evaluation," said Weinberg, who is also the former chair of the working group at ICANN responsible for developing the
recommendations that ultimately led to the seven new top-level domains (TLD) in 2000.

"But it certainly does seem to me
that choosing Telcordia opens them up to some possible criticism."

Telcordia officials were not available for comment at press time to speak
about its former ties to VeriSign and its possible ownership by Warburg
Pincus.

Weinberg said it's too early to jump to conclusions about any ICANN and
VeriSign collusion, given that there's no love lost between the two organizations.

Last February, VeriSign filed an antitrust and
breach of contract lawsuit against ICANN; in August 2004, a federal judge ruled
VeriSign did not adequately prove ICANN was conspiring to stymie its
business operations -- notably, the controversial SiteFinder and Wait-List
Service (WLS). The .com and .net registry has vowed to re-file in the
California courts.

Waiting in The Wings

Afilias and Denic -- two of the remaining three .net bidders -- seem to be responding generously to ICANN's selection.

Afilias officials did say they were optimistic about an equitable review process.

"We don't have much to say on the issue of Telcordia, but we are pleased that
the team appears to have a strong technical expertise," said Heather Carle,
a spokeswoman at Afilias. "We believe that an evaluation team composed of
technical experts will recognize Afilias's superior service offering. We
certainly hope for an unbiased selection process and look forward to
answering any questions that the evaluation team may have on Afilias's
proposal."

Officials at Denic, managers of the second largest domain extension in the
world after .com -- Germany's .de country code TLD (ccTLD) -- echo the
sentiments stated by Afilias.

"While the decision to engage Telcordia to review the .net applications was
unexpected, Denic remains confident that ICANN and Telcordia will come to a
fair and equitable decision based upon the merits of the proposals," said
Sabine Dolderer, Denic director and executive board member.

CORE++ was not immediately available for comment.

The existing contract between ICANN and VeriSign to manage .net ends June
30, and it's expected that ICANN's board of directors will name the winner
of the new six-year-plus contract in March.